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Global Financial Crisis Impacts China's Economic Growth

Last Updated: November 01, 2009 9:14 AM

Stephanie Ho

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Global Financial Crisis Impacts China's Economic Growth

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The World Bank says it expects China's economic growth will slow to its lowest point in nearly two decades - as the global financial crisis continues to take a toll on the world's fourth largest economy. Stephanie Ho reports from Beijing.

The World Bank is predicting China's economic growth rate for 2009 will slow to 7.5 percent. This number is nearly two points lower than China's expected growth rate for this year, of 9.4 percent.

World Bank economist Louis Kuijs says China's downturn will worsen in the first half of next year largely because of weakening export demand.

Although there is no way to make China fully immune, Kuijs says the Chinese government can take steps to help minimize the effects of the global crisis on the country.

"We
are seeing a weak external sector, we're seeing a rather weak private
sector demand in general, but we are seeing a government that steps in
and that is trying to do everything it can to keep growth at a decent
rate, and has the financial means and, we would say, the administrative
capacity to make that happen," he said.

China recently announced a multibillion dollar stimulus plan, which calls for injecting money into the economy through spending on construction, tax cuts, and aid to the poor and farmers.

World Bank China representative David Dollar applauded the package, saying more spending on social programs and aid to the poor in the countryside should help boost growth.

In a separate issue, Dollar said the lending agency and the Chinese government are in initial talks about providing financing for loans to other developing countries.

"The World Bank group is talking to China about ways in which it could contribute some additional financing of the World Bank group that will help developing countries," he said.

The
World Bank forecast is in line with projections by investment banks,
which have cut their China outlook several times, as global conditions
worsen.